Bid for a California Banking Giant : New Stagecoach Route : THE COMPETITION : Big Rivals See New Opponent; Small Rivals See New Openings

Wells Fargo & Co.’s surprise $10.9-billion bid to buy First Interstate Bancorp forces the big California banks to brace for stiffer competition, analysts said Wednesday, yet some rival banks cheered the announcement as a potential boon for their own business.

If the hostile bid is ultimately accepted, the new financial institution will be a formidable competitor for BankAmerica Corp. in particular, while creating opportunities for smaller banks to attract customers hungry for more personalized service.

Wells Fargo’s richly priced offer for First Interstate also may preclude a competing offer from an out-of-state financial institution trying to gobble up either of those banks as a way to invade the West Coast, the analysts said.

But giant banks in the East and Midwest, such as Norwest Corp. in Minneapolis or NationsBank Corp. in Charlotte, N.C., will not stop shopping for other banks they can buy in the nation’s most populous state, they said.

“There are maybe a half-dozen banks in the country that want to generate nationwide networks, and they can’t really lay claim to being a nationwide bank if they’re not in California,” said James Marks, an analyst with the investment firm Sutro & Co. in San Francisco.

Within California, the marriage of San Francisco-based Wells Fargo and Los Angeles-based First Interstate would be a greater threat to BankAmerica--the largest bank in the state--even though their combined assets of $106 billion would be less than half those managed by BankAmerica.

Wells Fargo, known for running a lean operation, would use cost savings from the merger to win customers from BankAmerica and other rivals, noted Raphael Soifer, analyst with the investment firm of Brown Bros., Harriman & Co. in New York.

“They could cut fees, if necessary, or plow the savings back into more and better products,” such as increased numbers of branches within supermarkets, a niche Wells Fargo has aggressively pursued, Soifer said.

The merger should also enable Wells Fargo to make bigger loans to businesses and to keep its rates on those loans at or below those of its rivals, he said. (BankAmerica, based in San Francisco, declined to comment on the merger announcement.)

Glendale Federal Bank, a thrift that has been heavily advertising its customer service, said it welcomes the merger because Wells Fargo would then “force more customers into fewer branches.”

“The service levels, post-merger, have a tendency to decline dramatically” in bank combinations, Glendale Federal Chairman Stephen Trafton said. “We look at [this deal] as another huge pool of potential customers, and we have already started planning our [advertising] campaign to attack that dissatisfaction.”

Stephen McLin, president of America First Financial Corp., a San Francisco-based operator of EurekaBank in Northern California, said he also expects to gain disaffected customers from the two banks, and thinks the merger would result in one less Wells Fargo or First Interstate bank branch near his offices.

But McLin said the merger would also “accelerate” the effort by out-of-state banks to buy California banks. “I’m sure all the files of acquisition opportunities are getting pulled out at desks right now” at banks considering a move to the West, he said.

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More Bank Bid Coverage:

* Wells bids for First Interstate. A1

* Offer boosts bank stock rally. D5

* More hostile bids possible. D6

* Workers fear job losses. D6

* Siart seen as a fighter. D6

* Consolidation of state’s banks. D6